Split Year Treatment
Under the Statutory Resident Test, an individual is either UK resident or non-UK resident for a full tax year.
However, if during a tax year the individual either starts to live or work abroad or comes from abroad to live or work in the UK, the tax year may be split into two parts:
- A “UK part” for which the individual is taxed as a UK resident; and
- An “overseas part” for which the individual is taxed as a non-UK resident.
A tax year will be a “split year” if:
- The individual is resident in the UK for that year; and
- The circumstances fall within any of Cases 1 to 8.
Individual must first be UK resident for the year under either the automatic residence test or the “sufficient ties” test. One must therefore look at the residence rules first before considering whether the split year provisions apply.
There is no need to elect for split year treatment as it applies automatically. An individual cannot elect for split year treatment not to apply.
Split Year Treatment Rules – The 8 Cases
- Case 1: Starting to work overseas
- Case 2: Accompanying a partner overseas
- Case 3: Ceasing to have a home in the UK
- Case 4: Starting to have an “only home” in the UK
- Case 5: Starting full-time work in the UK
- Case 6: Coming to the UK after ceasing full-time work abroad
- Case 7: Returning to the UK with a partner
- Case 8: Starting to have a home in the UK
Cases 1 to 3apply to individuals leaving the UK to either live or work abroad
Cases 4 to 8apply to individuals coming to the UKto either live or work here
Case 1 – Starting to Work Overseas
The tax year can be split if the taxpayer leaves the UK for the purposes of working abroad.
Where the year is split under Case 1, the overseas part of the tax year will start on the first overseas workday.
Case 2: Accompanying a partner overseas
In this case, to be eligible for split year treatment:
- The individual and his/her partner must have been living together in the UK either at some point in the tax year or the previous tax year;
- The individual joins their partner overseas in order to continue to live with them while the partner is working overseas;
- From the point of departure, the individual’s only or main home must be outside the UK for the remainder of the tax year;
- Any days spent in the UK following departure are within the “permitted limit” (being a maximum of 90 days of presence in the UK scaled down as appropriate in the year of departure); and
- A partner will be a spouse, civil partner or a person with whom the individual is living together as if they were spouses or civil partners.
Where the tax year is split under Case 2, the overseas part of the tax year will start with the day on which the partner starts to work overseas or the date on which the individual joins the partner overseas (whichever is later).
Case 3 – Ceasing to have a Home in the UK
The tax year can be split if the taxpayer had a home in the UK at the start of the tax year but later in the tax year, he “ceased to have any home” in the UK. In simple terms this will usually mean that the taxpayer is leaving the UK to go and live abroad and his only home will then be in an overseas country.
Where the year is split under Case 3, the overseas part of the tax year will start with the day on which the taxpayer ceases to have a home in the UK.
Case 4: Starting to have an “only home” in the UK
The “only home test” is met if:
- The individual has only one home and that home is in the UK; or
- The individual has more than one home and all of them are in the UK.
When considering whether the individual has sufficient ties, the “days spent in the UK” under the sufficient ties test must be adjusted to take account of the fact that it is the year of arrival
Case 5 – Starting Full-Time Work in the UK
The tax year can be split if the individual comes to the UK for the purpose of working “full time” in the UK.
Where the year is split under Case 5, the “UK part” of the tax year will start with the day on which the taxpayer starts full-time work in the UK.
Case 6 – Coming to the UK after Ceasing Full-Time Work Abroad
The tax year can be split if the individual ceases working abroad and comes to the UK. This will most commonly apply on cessation of an overseas work assignment.
Where Case 6 applies, the overseas part of the tax year will be from the beginning of the tax year until the last day of overseas work.
Case 7: Returning to the UK with a partner
Case 7 applies where:
- The individual has a partner whose circumstances fall within Case 6
- The individual accompanies / joins the partner to continue to live together in the UK;
- In the part of the tax year before the “deemed arrival day”, the individual either:
- Has no home in the UK; or
- has a UK home and an overseas home but spends more time at the overseas home; and
- The days spent in the UK between the start of the tax year and the “deemed arrival day” are within the permitted limit (which is up to 90 days scaled down as appropriate for the part year).
The “deemed arrival day” is the later of:
- The day the taxpayer moves to the UK so the taxpayer and the partner can continue to live together; and
- The date on which the partner becomes UK resident under Case
Case 8 – Starting to have a Home in the UK
Case 8 is very similar to Case 4.
The main differences between Case 8 and Case 4 are:
- Case 4 requires that the individual has no home overseas (ie, the only home is in the UK), whereas Case 8 only specifies that a home be in the UK (homes overseas are irrelevant);
- Case 8 requires that the individual has a home in the UK for the split year and the following tax year (Case 4 is silent on the UK home for the following tax year);
- Case 8 specifies that the individual must be resident in the following tax year (UK residence status in the following tax year is not a condition in Case 4).
Essentially, Case 8 will allow individuals to split the year if they become UK resident in a tax year while still retaining a home overseas.
Under Case 8, the UK part of the tax year starts on the date that the individual starts to have a home in the UK.
If you have any queries on Split Year Treatment, or the Statutory Residence Test more generally, then please get in touch.
Split Year Treatment was last updated on 10 January 2019